Asian risk managers look forward to relaxed renewals but seek action on innovation

High levels of capacity at both primary and reinsurance levels, relatively low losses in terms of severity and frequency and improved risk management and loss prevention approaches taken by Asian customers are all helping to maintain the customer-friendly market conditions, said the experts on a panel hosted by Commercial Risk Europe editor Adrian Ladbury. Asian risk and insurance managers are also benefiting from deeper and wider services from carriers and brokers as they compete for accounts in the competitive market. But the carriers say that they really cannot go much lower on price and vow not to recklessly extend coverage terms even further.hideThis means that improved service in areas such as multinational programmes, claims handling and loss engineering and prevention are very much on the cards. One interesting point raised a number of times over the two-day event was the apparent rise in interest in multi-year and multi-line programmes in the Asian corporate insurance market. Historically this has been a signal of a market hardening as brokers advise customers to lock their soft market deals into longer terms to protect against expected price rises. But given the scarcity of evidence of any hardening in terms and conditions it seems more likely that the insurers are willing to enter into such discussions in the hope that they can add extra lines of coverage to existing programmes and thus raise premium volumes. One likely target area for insurers in such a competitive market with limited room for organic growth is employee benefits as Asian risk managers reportedly become increasingly involved in this area. Participants of the Insurance Market Trends And Update: Is It Ever Going To Be Hard? debate were Duncan Howorth, CEO of broker JLT Asia, Kent Chaplin, Head of Lloyd's Asia Pacific and Hayden Seach, Head of Global Corporate & Commercial-Asia for Generali. All three agreed that it is becoming increasingly difficult to talk about a single market trend for Asia or globally, particularly in the large corporate market that tends to be more bespoke. But they did concede that the current level of capacity on offer and absence of large losses or financial calamities should lead to relaxed renewals for most Asian insurance buyers as we enter 2015. One question raised by a delegate during the discussion was whether the high level of capacity combined with a rising maturity in the Asian corporate insurance market means that Asian insurance buyers can now place their entire programmes with local markets and not have to rely on international markets such as Lloyd's. The panelists agreed that the local market is now big enough and diverse enough should customers want to head down that route. They also agreed that the way in which international insurers are now structured means that security should no longer be a question because local operations of international insurers rely on group balance sheets. John Ewington, Chief Executive Officer of Talbot Underwriting, the Lloyd's agency based at the London market's Singapore Asian operation, certainly did not see a problem in terms of security in the Asian market. "If you look at the sheer amount of insurers and reinsurers in the region you would be hard pressed to find anyone without an A rating," he said. "Therefore if there was a major event you may find some local fronting companies have a problem but the insurers and reinsurers behind them would be fine. I would not advocate placing the entire programme with one or two players, it is a good thing to spread the risk through the subscription market. But I do not see a problem with placing the programme in the Asian market only," he said during the discussions. Mr Howorth of JLT agreed that the Asian market had grown up and is now capable of handling big placements that historically would have needed to be placed in international markets outside of the region. During the previous day's discussion on the challenges and opportunities faced by the insurance market in Asia, Mike Davies, Regional Chief Underwriter Marine and Offshore Energy at XL Group in Singapore, said that he had recently seen the placement of 'well over' $1bn for an infrastructure project risk wholly placed in Singapore. "There was no need to go to London," he said. "I have been in this market for 17 years and seen a huge development. Almost every risk can be placed in Singapore now and does not need to be placed in London," he added. Mr Ewington agreed. "The development of Lloyd's Asia is testament to the growth of this market in recent times. There are 18 managing agents now in Singapore against one in 2002. This shows the commitment shown by Lloyd's to this market and all the big international insurers and brokers have responded. People are investing heavily in the region and it's not just expatriates, there is local talent. There is lots of capacity and appetite," he said. "It is very difficult to analyse risks from thousands of miles away, come here once a year and then export the risk. You also have to consider service standards if you are having to deal with claims. And if you are using a retail and wholesale broker and an international insurer that is not in the region it will cost more and take more time. If you deal locally you can build a direct relationship with the underwriter. Also we are seeing a lot more Australian business coming to Singapore and not just as a transit point to London. Singapore wrote $6.4bn of premium in 2013 and that is only increasing," he continued. Mr Chaplin and Mr Seach agreed that in many respects it makes sense for Asian risk and insurance managers to seek the regional option as underwriters and brokers are physically closer to the risk and thus able to more accurately assess and price the business. Mr Seach said that this local approach fits perfectly with the strategy followed by Generali and its leading rivals as they attempt to get closer to their customers' risks so that they can better manage their own risk portfolios. "The better managed the risk the more attractive it is for us," he said. Mr Chaplin does not believe an increased ability to use the regional market rather than relying on London to fill up the slip represents a long-term threat to London. He said that this was fundamentally the reason why Lloyd's had decided to set up its Singapore-based Asian operation back in 1999 that is now populated by 18 underwriting service companies that can underwrite local business. Proof that the concept works for Lloyd's syndicates was vindicated in April of this year when it was announced that a new Lloyd's consortium had been formed in Singapore to write general aviation insurance and reinsurance risks from the Asia-Pacific and Middle East regions. The consortium, led by Catlin Singapore and supported by Amlin Singapore, Talbot Singapore and Argo Global Underwriting Asia Pacific, offers 100% capacity with limits of $15m for aircraft with up to 50 seats. The new consortium joined two existing consortiums in Singapore, XIN Aerospace and XIN Terrorism, both led by Amlin Singapore. Praveen Sharma, Senior Vice President Global Leader-Insurance Regulatory & Tax Consulting Practice at Marsh, asked if there was rising interest in special purpose vehicles among Asian risk managers and whether the market was able to respond. Mr Howorth said that there was clearly a very high level of interest shown by the capital markets in the insurance and reinsurance market currently, mainly through the SPV route. But he and his fellow panelists stressed that this was mainly for short tail, catastrophe risks written on a reinsurance basis. The idea that such capital could be put to work for the corporate insurance customer, possibly to help deal with complex emerging risks that the traditional insurance companies are wary to underwrite, is probably as much wishful thinking as anything, they agreed. "This is short term capital that will exit the market as soon as the market is deemed to be unfavourable. This is not long-term capital. It certainly has a role to play but not in this market currently," said Mr Howorth. Another key area of discussion during the debate was innovation. Franck Baron, Chairman of Parima and Group General Manager Risk Management & Insurance for International SOS, the leading medical and travel security firm, asked how the market could and should deal with the fact that, in some cases, as little as 15% of corporate risk is insurable. This is a worry for risk managers because they sense that the level of insurable risk is falling as the global economy becomes more complex. Mr Seach said that this is a tricky challenge that demands an industry-wide response. Above all he suggested that the work really needs to start at source. This is because the risk manager should understand their risk better than anyone and provide the market with the sort of information it needs to try and underwrite insurance cover. The logic behind Mr Seach's argument is sound. No right-minded insurer in this risk-based modern day market can gamble its shareholders' capital by taking on emerging risks that have not been adequately identified and measured, let alone managed. The speed of change in the modern global economy, however, means that the market really does not appear to have the time needed to develop products in the way it did in the past. The obvious conclusion is that a new approach is needed in which all three parties-risk manager, broker and insurer-work closer together to develop coverages in partnership, probably on a more bespoke basis than in the past. This has been made crystal clear during Commercial Risk Europe's annual Risk Frontiers surveys of leading European and international risk managers over recent years. The Federation of European Risk & Insurance Management Associations (Ferma) is well aware of this need and announced plans during its recent Brussels seminar to gather the market, bang heads together and seek solutions in difficult risk areas such as supply chain and cyber during 2015. The Parima board agreed that this is a worthy goal and is one of the reasons why the association was formed in the first place. Commercial Risk Europe and Commercial Risk Asia look forward to working with both Parima and Ferma to further this critical discussion and seek real solutions in the coming months.

Asian risk managers look forward to relaxed renewals but seek action on innovation

Want to read this article?

Read Next

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Want to read this article?

Read Next

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Related Articles